Given the hierarchy among genes that control dorsoventral development of the Drosophila embryo, we previously investigated the transcriptional control of the NK-4 homeobox gene that encodes a homeodomain transcription factor and is required for mesodermal cell differentiation and formation of the dorsal vessel, an equivalent of the mammalian heart. We showed that NK-4 is a direct target of twist which is a determinant of mesoderm formation. As a transcriptional activator, NK-4 autoactivates the NK-4 gene itself and upregulates NK-3. In order to explore whether NK-4 can act as a transcriptional repressor, we performed domain analysis of the NK-4 protein using transient expression assays with GAL4:NK-4 chimeras and various truncated forms of NK-4 expression vectors, and found that the NK-4 protein contains a repressor domain (a.a. 111-188) as well as an activator domain (a.a. 1-110). Deletion of the activation domain resulted in full repressor activity of NK-4. Interestingly, deletion of the decapeptide region (a.a. 32-45) that is well conserved in the NK-2 class homeodomain transcription factors enhanced transcriptional activation activity of NK-4. We also demonstrated that the NK-4 protein can bind to other sites within the 5' upstream area of the NK-4 promoter region, although binding affinity is 50-fold lower than that to the E2 cluster which is responsible for the NK-4 autoactivation. These results suggest that the NK-4 protein has several regulatory domains and can act either as a transcriptional activator or a repressor to regulate downstream target genes. Regulation of NK-4 gene expression is basically dependent on two clusters of E-box sequences at the 5' upstream region of NK-4: E1 cluster for activation by twist and E2 cluster for NK-4 autoregulation. We cloned an NK-4 homologue (DvNK-4) from Drosophila virilis, and partially determined the nucleotide sequence. Deduced amino acid sequence of DvNK-4 homeodomain was identical to that of NK-4. Furthermore, we found that the DvNK-3 homeobox gene is located near the DvNK-4 homeobox gene (7 kb apart from DvNK-4), which is similar to their location in D. melanogaster. Surprisingly, we also found that the E-box clusters existed in the 5' upstream region of DvNK-4. These results indicate that the NK-homeobox genes cluster may play a key role during embryogenesis and that regulatory circuits for NK-4 expression are also conserved during evolution.